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May 22, 2009


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Yes, we're also doing fine despite the economy. But I don't feel like it's fair for me to take much credit for it--our solid position is mainly because my job is secure, and that's just because I'm currently at the top employment level in a field that is relatively sheltered from the ups and downs of the general economy. I've lost my cost of living raise and a few benefit perks this year, but nothing worth complaining about.

I suppose I could take credit for my family still living in a very modest home instead of moving up to a McMansion a few years ago like everyone told us to do, but the real reason was I was just too busy at the time to bother with looking for a new house, moving, etc. Of course, now I'm very happy with my dumpy little house and my extremely small mortgage (which I was recently able to refinance at an even lower rate)!

Our living expenses could be lower (I pay for a lawn service, housekeeper, and a nanny), but I only need these because I work so many hours and they could be dropped if I lost my job. Even so, we live on only about half of what I make, so we can save a good deal. My kids' attend a public school, we have no debt besides the mortgage, and I fortunately had only 30K in stocks last year so we didn't lose much when the market crashed.

I do feel good that I never got into a debt hole, but I think that was mainly because of *when* I grew up. In the 70's and 80's, credit cards were seen as a totally different beast than they were in the 90's and 00's--and I never got my head turned around to how people treated them later.

Do I have a secure job? yes. Do I live below my means? yes.

Does that mean that the economy is having no effect on me. Certainly not.

My pay is a joke (when compared to my education) and my job is uninspiring at best. Unfortunately, any chance of career advancement is pretty much dead until things turn around. I can't compete with people who have 3, 5, 10+ years of experience and just got laid off.

Another consequence of this is that I'm stuck living in a place I do not want to live. No offense to other MidWesterners but I've had it with the cold and snow already. Six months of winter is ridiculous.

Psychologically, this feeling of being stuck is a difficult one to grapple with.

The lack of the economy's effect on you is also due to your career and life stage. Not just good financial management. For you, you are so far advanced in your career and your life that so long as your job is secure, the economy can do whatever it wants. You'll be fine. For me, who is at the beginning of a career and a life, if the economy doesn't get moving I don't get moving.

SaveBuyLive --

"No offense to other MidWesterners but I've had it with the cold and snow already. Six months of winter is ridiculous."

Ha! Welcome to my life! Come to Michigan where we have eight months of winter. ;-)

Maybe a thought for SaveBuy live--
Did anyone ever tell you 99% is attitude? Maybe instead of spending so much time enumerating negatives, you should try to notice the positives. I'm sure all of us would change some things about our lives if we could, but--at least you have a job and a house and are healthy enough to post a comment; many people dream of those things and wish...........

Yup. Doing just fine thanks. Our dual incomes are higher than ever, our debt (mortgage and student loans) load is manageable at 20% of our take-home pay, we save over 30% of our take home pay, have 2 kids in top-notch private schools, our net worth is in the positive, drive 2 paid for cars, and we hit the $100K benchmark in savings (I've worked 4 yrs, hubby 7). I'd say we're doing quite well, and better than ever, despite this economy. Yes, we took a hit when the stock market and our home equity dropped, but long term, it shouldn't hurt. We went to Town Hall for Hope too, and while we didn't feel we learned anything new, it was nice to hear that not everyone was believing the doom and gloom of the mainstream media.

We're doing fine too! My husband and I just finished paying all our debts the end of last year. We loosened up with spending on entertainment, shopping, and eating out. Since we have our wonderful emergency fund in place, no debts, and we're able to spend a bit more in other areas, it seems like the struggling economy hasn't hit us at all. We are very grateful for stable jobs and the fact that we'd be fine for months if one of us were to lose our work. We are now able to buy things we couldn't while repaying debts and are so happy to see giant chunks of money (to us!!) going into savings each month! We've been married 2 years and are debt free and very blessed!

FMF, I like your blog, but this post smacks of smugness. I agree with MC--whether one is maintaining their pre-recession standard of living has less to do with their financial habits and more to do with job security. Good financial habits are key to keeping your head above water after losing a job, but for the most part people who are experiencing difficulties right now are those who have lost their jobs or have had their wages cut--things largely out of their control when businesses are forced to cut a percentage of workers and/or salaries in order to stay viable.

I have to say we are doing pretty good despite the economy, our jobs are secure and our companies are doing very well.
We own two homes and still have some debt but we continue to save and invest, in 2.5 years we can sell the other home and everything will be better!

I love winter now that I have a 12hp snowblower :)

LAR --

It is a bit smug, I admit, and I tried to balance that out as I wrote the piece. Maybe I didn't do a good job at it.

The points I wanted to make here are:

1. It's not as bad as the MSM makes it out to be. There are many people (most in fact) doing fine.

2. If you follow the financial principles we talk about here every day, you are in a better position to weather economic storms. It was this point that I hoped would encourage people to keep working on their finances so they'd be prepared for the next downturn (if this one wasn't going well for them.)

3. Much of it is about your career: managing it and keeping it going. With a job, most people can make it through most things.

Sorry those didn't come through...

my wife and I are doing good.
still paying off some debt, almost were
we want to be.
but i know the economy has hit a lot of folks around us.
so we scream poverty also so no one asks for money,
unless of course its a life of death situation.

We're doing OK too. My wife and I both work in the medical industry. She as a rad tech, and I as a project management consultant in life sciences.

the only hit we're directly taking now is in trying to sell out house! Not a lot of first time homebuyers showing up here in NJ.

Indirectly we're seeing a hit - I have a few friends out of work and my sister had to take a day off every other Friday and a 10% paycut at her job in interior design - their clients are mostly commercial....and includes several large banks in the PA area.

If your investments in the stock market have taken a huge hit then you're thinking about it wrong. Think of it more as they have 'reverted to the mean'. That is, to the place they should be if you are thinking "long term". Over very long windows, the inflation adjusted and with dividends included return from the market is about 6.5%. Over shorter windows, you might get 4% or you might get 7%. However, factor in that companies are tending to lower dividends as time goes by and the outlook is not so rosy going forward. To keep the higher end of the returns you really need to long stable periods of low inflation. High-inflation does terrible things to the results and pushes them negative over multi-year periods.

Look at the long-term inflation adjusted house price indexes - relating median house prices to median salaries. The last bubble was unsustainable. Our population just doesn't grow rapidly enough, and earn money rapidly enough, to sustain a historically unprecedented ratio of price to salary.

Combine that with the fact that we are an aging population. In 1990, 40% of the US population was younger than 35 years old; by 2010, only a third will be younger than 35. In 2010, the majority of the US population will be 45 years and older. By 2020, one in five workers will be 55 years and older

Older people tend to own more assets, of all sorts, than younger ones. The problem is that they need to liquidate assets to retire in the style they wish to. They need to get out of the stock market. They tend to have bought "bigger and better" houses and then want to downsize to "free up equity". As the general population ages, and you can look for data from other countries like Japan, it means that there are more sellers than buyers which puts downward pressure on prices of all sorts.

Now, certain lucky people do well and manage to cash out at the top of a bubble. If you sold your house and move from a stock heavy to bond heavy portfolio at the right time then you are golden. And some people do it out of dumb luck. Given enough people retiring each year then of course you get those years when people were really really lucky. Think Forrest Gump investing in some company called "Apple". But "for example" is not proof. And people make dangerous assumptions based off lucky people.

We are doing fine but in business times are tough. We have to fight very hard to get sales and keep our margins from going negative. No pay raises this year, no bonuses.

And the work is harder than ever.

But at home things are A-OK. Even if the job goes away we have enough socked away to cover a thousand months of basic living expenses without factoring inflation- (that's one of the reasons we don't retire). So it's ok. But make no mistake, when a lot of people suffer the things we take for granted in society break down. That is reason enough to make sure we all chip in and help our fellow neighbor.


What's changed?

We have zero debt, great healthcare, a lovely home, two pension checks and two SS checks arriving every month, and we moved our investments into CDs and municipal bonds in November 2007 before the economy and market tanked.

It's all about managing your money wisely from day one and not buying what you don't need.

This comes off as a very disingenuous statement.

First, you stated that your portfolio just took a big hit but it doesn't have any impact on you. Questionable.

Second, you've been looking for a new credit card with better rewards because banks are cutting back yet you say the economy hasn't impacted you.

Third, you feel very secure in your job yet you recently wrote a post on what you would do if you were fired. Why write such a post if you're so secure in your job?
Why were you even thinking about it and planning a strategy?

The US is about to lose the AAA ratings on government bonds.
The banks are about to undergo another trillion dollar of ARM resets which will impact capitalization.
Job losses continue to mount at a rate of 500k per month.
The state of California is INSOLVENT and will require bailout. If California gets a bailout, you can expect every other state start begging for money.
GM will likely file for bankruptcy at some point over the next few months and a trickle down of bankruptcies will make things worse.

I could go on but what's the point. If you were paying attention you would have seen this data and understood the real situation but everything looks fine when all you do is look though the window at your back yard and see a green lawn and kids playing.

It is much worse than anything the media has been talking about on TV.

Trask is spot on, Dave Ramsey is a fool if he thinks things are "not so bad". Do you know the difference between a recession and a depression? A recession is when bad things happen to someone else. A depression is when they happen to you. Just because you have an 8-month emergency fund and still have your job doesn't mean the world is falling apart around you.

Oops, is NOT falling apart around you.

My secret to success? I knew we were in a housing bubble since about 2004, and the more I studied it the more I realized the country was running on equity extraction and debt. So I got out of the stock market entirely around 2006 and then started shorting it in 2007. When almost everyone else's net worth drops 30-50% and yours increases 50% at the same time, that is a game changer. If I didn't live in SoCal I'd retire today, but since I choose to live here I'll have to work till 45 or so.

The economy has definitely had an impact on us even though we have planned and saved and are in a relatively good financial position. In fact we had our first child last November and have been able to have my wife stay at home and work ~6 hrs per week. Our spending is down a bit because of the loss of half our income but we have no debt outside our house and student loans, 6+ months expenses in an emergency fund and can still invest in my company's 401K to get the full match.

That being said we are feeling the housing crunch as our house has lost 25% of its value and we had planned on moving back to Oregon (currently in Michigan) to be close to family. Well since we can't sell our house without taking a big loss this has been postponed to next year (2010) in hopes of seeing some recovery or at least enough of a reduction in the mortgage to afford selling.

Besides my shrinking net worth, and the ever-present threat of layoffs, we've done okay despite all of the gloom and doom. Our cash flow remains positive, I have my health, and as long as I'm still breathing, I'll find a way to make money.

Living frugally makes a huge difference in that ever-important attitude -- although the make-or-break, of course, is whether one still has a job. I feel like the recession hasn't affected us, but I just looked at my year-over-year projections (I am self-employed) and can currently anticipate that I'll make only 60% of what I made last year! That is a HUGE hit, but because we have battened down the hatches we are still saving, investing in our home, planning vacation, etc. Good luck to everyone who is in the job hunt.

Trask is absolutely correct.
The Federal Reserve and the government, have been spinning the news, and the largest Wall St. firms have been cleverly using program trading to make money, keep the stockmarket moving up, sucker little investors in, and to make people feel good because they know that they don't want to hear the truth because it's too scary.

America will eventually recover but it's longer away than many people think and the new American economy will never be like the old one. America is undergoing a downsizing - just look at all the vacant commercial real estate for lease in just about every shopping center and mall. Many of the high paying factory jobs that have been lost will not be coming back because the products they used to produce are now made overseas. The saving rate of the American consumer has gone from negative to strongly positive because they are scared that they will lose their jobs, their homes, or even both. That's fine except it was the American consumer that was using the rising equity in their homes and credit card debt to live far beyond their means, and provide the fuel that powered the World Economy. Where's that fuel going to come from now?

I read many newsletters about the economy written by some of the most knowledgeable and successful people around and not one of them paints a rosy picture. This is not simply another recession in the business cycle like the many we have been through - this is a life changing event for a huge segment of the population. When was the last time that entities like GM, Chrysler, AIG, Fannie Mae, Freddie Mac, Bank of America, Citi Group, Lehman brothers, Bear Stearns, Wachovia, Countrywide, Merrill Lynch etc. failed, needed government rescue, or were bought out?

The segment most immune from the economic downturn is wealthy retirees that now own expensive real estate free and clear, have built up large investment portfolios over their careers, gained the experience and knowledge to dodge bear markets, have plenty of pension and investment income, and won't live long enough to see Social Security and Medicare run out of money.

Trask --

I think you need to take a chill pill.

Many of your statements don't even make sense. For example, whether or not credit cards offer rewards (and what those are) will have very little impact on my finances. Sure, I make $500 a year or so now, but even if they go away 100%, that's virtually zero impact on my finances.

Also, I can't write about problems that exist for people that I don't have? (Like what to do if you lost your job.) If that's the case, then I can't write about being in debt, not having enough for retirement, etc. Sheesh.

I think you're way too worried. We'll see who's right, but even if you are, I'm still in better financial shape than most.

FMF - no offense, but you'll be saying: "My job is secure (and our company is doing quite well, actually -- could be a record year.)" right up until you get laid off, just like I was in my last job (from which I got laid off last month) in the health care industry, which was supposed to be secure with Obama pumping money into it, right?

Assuming your company will keep you around no matter how important you think you are to them is just naive.

It is awesome that you have managed to maintain good employment for long enough to build a cushion and pay off your house though, so props for that. Hopefully more people can do the same but it seems to me like the guys in charge of these companies don't wish the same fortunate circumstances on their employees.

MRM --

Sorry to hear about your job loss.

I do need to acknowledge that my company is a bit different than most and I have a bit more security than most for reasons I don't want to go into. But you're right, ANYTHING can happen. That's why a low level of spending and a good emergency fund is vital. Couple that with a few options (I've written a few times about my "plan B" and what I'd do if I was let go) and we could make it for quite some time without a job. I hope you're in the same spot as well.

MRM --

BTW, let me know if there's anything I can do to help you out. If you'd like to do a "help the reader" resume review here, I'd post it.

Trask & Old Limey,

If you are so worried about the USD going down why don't you hedge by storing some of your wealth in another currency like the Australian Dollar or Singapore dollar? Of the universal alternative currency, gold?

Life may get tougher but we all still need to live and eat. And though the dollar gets weaker I don't yet see more jobs that pay in excess of $100k.


Quite frankly, the secret of long-term financial success is that you don't do anything differently in good times versus what you do in bad times.

You live below your means and spend frugally when times are good, and when times are bad.

You invest aggressively but appropriately when times are good, and when times are bad.

You actively manage your career / income when times are good, and when times are bad.

I hate to say it, but it really is that simple. Does that mean that you are 100% safe from anything bad happening to you financially? No. But this is the safest way to secure your future and build your wealth over time.

Gold is far too volatile for lots of people, myself included, to use as an investment.

Take ^XAU the Philadelphia Gold and Silver Index over the last 12 months as an example.
The starting price on 05/21/08 was $191.26
The high made on 07/14/08 was $201.13
The low made on 10/27/08 was $64.36
The price on 05/21/09 was $149.88
In 3.5 months you could have had a worst possible loss of 68%.
Then in the next 7 months you could have had a profit of 232%.
If you had bought and held it for 12 months you could have lost 22%

With volatile investments like that you have to be a very good short term trader to make money.
At least with my CDs and municipal bonds (all being held to maturity) I am making an average of 4.53% interest, worry free, and they are either tax deferred in our IRAs or tax exempt in our trust account.

The US dollar is still the reserve currency of the world and unlikely to change for several years.

People posting about the sky falling and posting negatively on FMF's post don't get it.

That would be Lar, Trask, Pop, & Old Limey.

Sure this is a tough economy, all recessions are. Sure this is the most unemployment we have had since 1982, but we survived that just fine. (Unemployment was 12 percent then, its still under 9 now and yes going higher but probably not going above 12).

Yes the financial system has trouble and consumer's have debt problems but here is the point. The consumer debt problem and the consumer's credit drying up is why this feels so bad for so many people. FMF's point and the whole point of this blog is to avoid that situation. People who are living off of debt and credit are pinched greatly but that's of their own doing.

Now as FMF said in his two reasons at the top of this post if you lose your job then clearly this recession will impact you greatly. So unemployment was went from 5% to 9% in the last 2 years of this recession. So that is an extra 4% of the US working population. For those people the recession is greatly impactful. And for those who know their job is in serious jeopardy clearly they will be pulling back as well.

But if you have not lost your job and your current job is reasonably secure the immediate impact on you should be zero. That is large majority of the population (notice everyone's job is always somewhat in jeopardy, thats not the same as in serious jeopardy). So why is nearly everyone feeling the pinch of the recession. Those answers are easy. Debt, and spending money beyond income based on future earnings growth and past and future asset appreciation (houses and stocks).

This is why everyone is feeling the pinch. Why are people spending extra money because their house went up (Home Equity Withdrawals) or spending extra money because their stocks went up (just put it on the CC or take out loans because the stocks are worth so much more or sell all the stocks and spend it) or buying houses they can't afford on short term rates that are set to drastically increase in the future just to get into their "dream house." All of these things create a lifestyle that exceeds your income and when the sources that let you spend more than you make go away or pull back then you feel the big pinch.

All of this is vastly irresponsible and its why so many people are feeling things so hard this time around. I have wondered myself why this is supposedly so bad. I have lived and worked through the 1991 and 2001 recessions. Both felt more real and more personally worrysome to me than this one. Perhaps being newer in my career I felt the chance of losing my job was more possible then and that could be why but having made myself more financially secure and not less in that time is also a great benefit.

If you have not lost your job and have the same income stream but the recession is squeezing your finances then there is no way to say it other than you have been very financially irresponsible. Sorry if that sounds harsh but it is accurate. (Barring of course odd events like medical emergencies but please don't bring up strange unlikely one off events as a counter argument.) If you have lived below your means and you still have your income source then anything else that happens in the economy has very close to zero impact on you. In fact it's usually a boon as the lack of demand means better deals for you (and FMF alluded to that too).


Bravo .... you nailed it!

FMF wrote:

"Many of your statements don't even make sense. For example, whether or not credit cards offer rewards (and what those are) will have very little impact on my finances. Sure, I make $500 a year or so now, but even if they go away 100%, that's virtually zero impact on my finances."

On the one hand you're constantly telling people that every little thing counts in your famous "spend less than you earn" diatribe and then when $500 disappears it's no big deal because the big picture is your career.

If you're THAT secure in your job then you probably work for a church living off the charity of other people because there is no other industry that can be THAT secure that you don't ever have to worry about your job.

IF (and I repeat IF) the economic situation continues to meltdown then YOU will be impacted in any possible number of ways:

1. Possible riots (e.g. getting your home burned down)
2. Possible assault/theft on you or your family.
3. Possible assault/theft at your place of employment.
4. Possible seizure by the government of your money (e.g. higher taxes)

The list goes on and you're right one of us will be right. Let me throw the gauntlet down and say that by the end of the August/September things will be much WORSE than they are right now and definitely not better. And I will also say that next summer (2010) will likely be the breaking point for many (see #1 thru #4 above).



Why are you so angry and bitter.

you presume that people working for a church and "living off the charity of others" have job security? When the economy tightens donations go down and people get laid off. Churches have no ability to live beyond their means. I personaly know multiple people from our church who have been laid off and since churches don't have to pay unemployment insurance they get no unemployment when they get laid off. Working for a church is far from secure. I would sooner work for a private company any day. Far more secure.

What conspiracy advocates do you follow? Riots? Assaults on people's families and places of work? You stock piled food during y2k didn't you?

I am sorry that you live in such irrational fear of highly unlikely events. So since august is when things are much worse will there be riots by then? What will august look like. Presumably by summer 2010 there will for sure be riots and widespread personal assaults based on your comments.

BTW, of course taxes will be going up. All the more reason to save now because in the future it will be harder to save under higher taxes. Thats no an impact of the reccession. Thats an impact of the government living far beyond its means and not following the rules of this blog.

Trask --

Apex beat me to what I was going to say.

The only thing I can add is that even if what you say does happen, getting all upset about it now isn't serving any good purpose (taking action would, but just worrying won't help you), and it could negatively impact your health.

Apex--I never said the sky was falling. I said I thought FMF's post was smug. I still believe that. I believe we will come out of this recession just as we did in the '90s and the '80s. The sky isn't falling. But the post said that "[m]uch of this situation is attributable to good financial principles," when in fact much of the current recession having very little impact on a person stems from keeping his or her job. Much of weathering the recession reasonably well in the event of a job loss stems from good financial principles. See the difference?

Oh, and I do "get it." I have a degree in Finance. I have studied macro- and microeconomics. I have two graduate degrees and a job in the financial services industry.

LAR --

Actually, you're taking a portion of what I said to make your point. The exact wording you quote says:

"Much of this situation is attributable to good financial principles -- having no debt, saving a good portion of our income, growing and protecting my career, etc. -- the sorts of things I talk about here on a daily basis."

Notice how career is mentioned as part of "good financial principles"? I know that I broke the two out earlier in the post, but really "growing and protecting your career" is part of good financial management (since your career is your top financial asset.)


I disagree that much of the current recession having very little impact on a person stems from keeping his or her job. It should be the case that is true but it's not. So as I pointed out, unemployment has risen 4% since its lows. So at most 4% of the working population has become unemployed as a result of these "dire straights." When you hear about all the financial chaos and hand wringing in the MSM is that only from the 4%. The rest of us just go on about our day like nothing happened? Certainly not. We should be able to but most are not able to. Why? Because many people have been putting tons of extra expenses on credit cards and now the payments are going up, rates going up, fees going up, limits slashed (sometimes below what is due), cards cancelled etc. All the credit is being pulled back. Now instead of being able to spend more than they made people are forced through the loss of credit and higher interest rates to spend less than what they made. This is a shock to the system of many people's personal budgets. The same is true with respect to home equity withdrawals and stock sales. People have been living off of credit and asset gains for a decade or more allowing them to live beyond their means. And now when they still have their means (job) they still feel a very painful crunch because now they have to live within it and below it just to dig out of their mess. That's why its so painful across the board.

If everyone who had been working atleast 5 years had lived below their means, had a 6 month emergency fund, hadn't bought too much house. Had not been spending based on home equity or stock gains, and all but the 4% who lost their jobs still had their income and were still spending less than they made, how painful would this be for the other 96%? Not painful at all and everyone would be wondering what the MSM was talking about. But unfortunatley thats not the reality is it?

As long as I have the job, we are fine. We are spending on travelling a lot because of hotel/ travel deals / gas prices and have been been to over 10 states in the last 10 months. We were saving to travel sometime in future, and find the money is getting us really far and it is worth travelling now - less crowds too.

I've still got my job so day to day my life is not changed much due to the recession. I have lost some cash though. I didn't get a raise this year and my bonuses were lower. But I already save 30% of my pay and I count on minimum bonuses and I don't count on raises. My retirement, stock and real estate assets are all down in the past year. But I don't need that money anytime soon and they are all long term investments with expected ups and downs.

On one hand only a small % of Americans are directly unemployed from this recession. But on the other hand half of Americans live paycheck to paycheck and are feeling squeeze of all the problems caused by the recession. Many people haven't lost their jobs but maybe their spouse has. Or maybe their employer has cut back on time or pay/benefits. There are a lot of indirect impacts from the recession that may not be as bad as outright unemployment but are still substantial.

I don't think things are quite as bad as the media makes them out to be but they've got to fill 24hrs of news a day. The recession is certainly very bad. This is the worst recession since 1982 at least and possibly worst since WWII. Its NOT a depression by the traditional technical definition. Riots are not likely anytime soon unless the result of a city celebrating a pro sports championship.

FMF wrote:

Trask --

Apex beat me to what I was going to say.

"getting all upset about it now isn't serving any good purpose (taking action would, but just worrying won't help you), and it could negatively impact your health."

But writing a smug post on how awesome you are is doing people good right?

As for Apex, I'm not angry or bitter and could care less who's broke or who's not. What got many people INTO this mess were bubble heads always insisting that it was always a great time to buy a house and it was always a great time to buy stocks. Remember when FMF would post "I'm buying stocks because they're at a great discount" back in 2007 when the dow dropped from 13k to 11k? Well the DOW is now at 8k and it should be a great time to buy stocks but I don't think I've read a single post this year where FMF says "it's a great time to buy stocks."

You're absolutely right, if people hadn't done this and done that we wouldn't be in this mess except you're leaving out the part where nearly EVERYONE was euphoric about housing, stocks and the economy.

Right now, I'm pointing out that things will get worse (my opinion) and many more people will be impacted (possibly even FMF) in the near future. At some point we may recover but you need to look no further than the failed 20 year decline of powerhouse Japan to understand that it's a long climb back from the bottom of the mountain.

Trask --

One example:

Quote from it:

"I'm still investing at a good rate (401k and part of my paycheck) automatically each month as well as saving in other avenues throughout the year. I know the market will come back eventually and since I have a 20-year time horizon, the money I invest now should do well over that time. That said, I'm expecting the next year or two to be really rough. But who knows what will really happen? I certainly don't."

1. I'm still investing. Haven't written a "stocks on sale" post because I've said that enough before, have kept doing it, and haven't waivered. But I have mentioned it here and there, like in the post above, if you're paying close enough attention.

2. I don't know what's going to happen.

3. You don't know what's going to happen.

4. No matter what happens, people that have handled their finances better than others will do better than others.

5. I have no stress in my life regarding this issue.

Trask --

Here's another one lest you think I only have one example:


"I've continued to invest in index funds (mostly stocks, but some bonds) throughout the stock market's fall and I'm counting on the fact that they'll do quite well when the rebound occurs."


We are doing great! I see this is a very lively thread, and off topic since FMF asked for your secret to success but that's another topic for another day.

For all those who think the post is smug. I can see where you are coming from. I think it all depends on what frame of mind you have. Because my wife and I follow the same principles that FMF talks about here, and I read his post and I felt the same joy and comfort b/c the sky is not falling all around us.

HOWEVER, I have about 10 friends and family members who are out of work and struggling and that dream lifestyle they were living is not so dreamy anymore because when your pay stops the bills keep coming. They are stressed and my heart goes out to them. I've been there, done that, got the t-shirt.

But if you live a debt free life and spend less than you earn then magically you won't have the same financial woes as the majority of Americans (unless something major happens). Recessions will come and go and they won't affect you b/c you've prepared adequately.

If your car broke down in the middle of the winter and you had no blanket, emergency kit, etc. in your car then you're S.O.L. Now if the same thing happened to you and you were prepared then you can "make it through" the misfortune a bit easier. It’s the same way with money.

We follow the Dave Ramsey principles and I happen to be a full time stock option trader so I'm able to make money whether the stock market is up or down. So again we are doing great and are helping others to live the same way by teaching the Dave Ramsey class.

We are all adults, we make choices, and those choices take us down a certain path and to a certain destination. Some of those destinations are good and some are bad. A good book on this fact is called "The Principle of the Path" by Andy Stanley. It's a great book and my wife and I are reading it together and following its advice as a family.

So FMF to finally answer your question. Our secret is that we have no secret we just use good common sense. Spend less than you earn, save for a rainy day b/c companies due layoff and they don't care if you think it won't happen to you. People get sick, my father dies od cancer. Do you think he planned on that. But having insurance protected us. We invest, bla bla bla. It's the same old advice that people are tired of hearing.

The day they actually apply it, is the day when they will rejoice at hearing it.

To Your Success,

My finances are in order, my home is a few short years from being paid off and I'm in an industry that is only marginally affected by the down turn in the economy.
My Roth IRA and 401k accounts are still above my initial investments. Does it bother me that they are down at all? To a degree yes, but I still have 15+ years before I'm ready to retire.
I'm comfortable and yes, a bit smug.

Here's an interesting opinion to add to this thread. All the people who follow the FMF principles to saving money and growing net worth are actually a general minority of the country. Generally we are a debtor nation, both public and private. The savers are a small minority.

Ironically, if everyone started saving in the same way that would be bad for our economy in the short to medium term. That's why the gov't is doing everything possible to force people to spend. Supporting an inflationary policy is one of the main things the gov't does to force spending since money spent later would be worth less than money spent now. That's the justification behind throwing trillions into insolvent banks and institutions.

We are going through a period of deflation, in consumer goods as well as housing and equities. Energy and food as well as healthcare and education may continue to rise but there is deflation in other areas- big wage deflation for sure. So the people who are savers and who are not in debt have much more cushion to ride this out, no doubt.

But we as a country are all in the same boat so as more people can't make ends meet (because of too much debt), we all end up suffering. Either through the way Trask mentions - social & civil unrest, or through inflation / taxation. There is no way to escape feeling some pain and we should prepare for this. But the people who have a savings are no doubt better off than those who don't. It's comforting but that doesn't mean the savers will be shielded from what's coming.


I'm doing fine. I haven't been affected by the downturn in the economy, much as the previous downturns didn't affect me, either. I'm still on track to retire at 51.

(Well, my mutual funds are down, of course, but not as far down as they were during the previous bear market of 2000-2002.)

In fact, I regard much of the wailing and gnashing of teeth over the economy as excessive. Capitalism has booms and busts, it always has, and throwing a hissy fit everytime the market (free and stock) has a correction is not helpful.

The long term outlook for the country as a whole is certainly gloomy, but I should be dead by the time of the worst of it.

I'm not just doing fine, I'm doing great.

A friend of mine writes, so I've been aware of the housing bubble for some time. As a person who lives well below my means (spending about 35% of take-home pay), I saved up a lot of cash with the intent of eventually buying a house, but was waiting for the bubble to burst before I actually spent it. So when the housing bubble burst and took down the stock market, my cash gained the equivalent of about 60% against the stock market... and then I moved a big chunk of it into the stock market about the time we were hitting 12-year lows. Since my time horizon is 40+ years, I'm in really good shape.

Furthermore, my wife works for a large defense contractor and has the highest retention rating, so they'd have to lay off 95% of the company before they could fire her. Even then, they'd probably hold her as long as possible, because she's extremely good at what she does. I work for a non-profit that's struggling somewhat, but again, I'm extremely good at what I do, and what I do is at the forefront of our core mission, so I'd be way down the line if layoffs were to occur.

So basically, I've followed FMF's advice (no debt, save a lot of my income, grow my wife's career -- my long-term plan is to raise the kids, so my career is secondary) and, additionally, I kept my assets away from the market while it was inflated and got into the market when it reached what I thought was a good value. (This isn't a matter of "timing the markets" as in aiming for the top/bottom, merely a matter of "comparing value" and making a purchase when the price was right.)

its all depends, how well U are doing, your job, cause, if the company is getting down- u want stay above the ground

FMF, I just wanted to express my appreciation for 2 things: 1) the great advice you provide on the blog, which I have been following for a long time. 2) for the offer of help after my job loss.

As soon as I got home from being kicked out of the building when I was laid off, I started working on my resume and sending it out. I worked practically non-stop filling out applications and sending out my resume for 3 days. I managed to get a job in the same field (IT-programming) on the 3rd day after my layoff. I consider myself blessed and humbled at the same time. I really hope I never have to face that again and I wouldn't wish it on anyone.

Thanks again!

This post highlights the general need to invest in two areas. Not only does one need to invest in traditional investments (e.g.- in a house, stocks, or bonds), but unless your job security is guaranteed, you need to invest in your career as well. Even if you haven't been laid off, in this economic environment there is often the threat that you will be expendable or that your salary will be reduced. Those who have invested in acquiring or refining their technical proficiency, marketing abilities, and other career-related skills have a clear advantage when it comes to finding a new job or increasing their compensation. Unless you have an extremely large emergency fund or an extremely secure job, the best financial planning for a recession that you can't predict is to invest in your career.

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